Calculate the Weighted Average Cost of Capital (WACC) using the Capital Asset Pricing Model (CAPM) to estimate the cost of equity.
(b) Calculate the financial viability of the expansion project using the Net Present Value (NPV) method and provide a recommendation whether or not this project should proceed.
(c) XYZ paid a dividend of 10 pence per share last year. The current share price is 132 pence. In the last five years dividends paid by XYZ have grown at an average rate of 5% per annum. Estimate the cost of equity using the Dividend Valuation Model (DVM) and a revised WACC.
Also calculate the impact of this change on the NPV of the expansion project and comment on whether this changes your recommendation in (b).
